The Truth About Social Security’s Future

Would you like to know whether Social Security will “be there” for you when you retire? Then you’re not alone, because everyone who gets a paycheck has that same question. Older people just ask it more often and with more urgency.

I had always wondered if any of the politicians or economists agreed on the future of the program, because it seems all the so-called experts just argued about the topic constantly. So I started looking at some of the top writers and experts in the field to see if they had any areas of agreement about Social Security’s future. I was shocked to discover that they did.

Is it going bankrupt? Will it survive indefinitely? Will MY benefits have to be scaled back to save Social Security? These are the types of questions that keep middle-aged taxpayers awake at night, and I am definitely one of the sleep-deprived worriers.

The Surprising Truth

Here’s what I found out, to my great relief (sort of) when I began comparing the arguments of the rosy scenario folks (who say Social Security will never die) and the doomsday crowd (who preach darkness and calamity). Amazingly, the two groups agree on most basic points about the long-term health of the program, even while they disagree about how politicians might “fix” Social Security.

Below, note how the “worker to beneficiary” ratio changes over time. That of course means that by 2030 there will be far fewer workers paying into the system than there were in 1960, compared to the number of retired people in the population.

This little graphic, though accurate, is the source for all the worry and frustration about the Social Security system. It is also quite misleading, even though it was produced by the Social Security Administration.

The “It will survive,” VS the “It will not survive” Question

When I looked more closely at the two sides of the Social Security predictions, I realized that they have one thing in common: they both predict that the system is not really in super-serious trouble as long as some relatively minor changes are made. Most of the arguing is about how “minor” those changes really are. Here’s a quick outline of what both sides have to say about Social Security’s future:

The Doomsday Club

Even dire predictions of a system failure for Social Security aren’t as bleak as most people think. At worst, according to the SSA itself, the year 2034 will be a day of reckoning, but not a really horrible one. It seems that Social Security’s “death” has been much exaggerated in the media.

If absolutely nothing is done for the next 16 years (an unlikely prospect), benefits would have to be cut by about 21 percent in 2034. Then, by 2089, they would be cut another six percent.

So, the “death and destruction” of Social Security means that benefits shrink, but the system would still function. In fact, even the worst predictions see Social Security benefits at three-quarters of their current rates. And that’s if NOTHING is done.

An increase in retirement age, a slight increase in FICA rates, an increase in retirement age, or an increase in the payment cap on income would all be ways to extend the 100 percent payout level for Social Security for many more decades.

The Rosy Scenario Crowd

Even the most optimistic experts, like the economists at Forbes, think Social Security needs some basic changes if it is to live longer than two more decades. The Forbes team sees a possible increase in the retirement age from 67 to 70, and increase in SS withholding tax rates and a possible reduction in basic benefits. One, two or all of those alterations could extend the program indefinitely.

Most people who say “Social Security will never die” advance what is called the “constitutional tax” position. That sounds complicated but it’s not. It goes like this: as long as Congress has the Constitutional power to tax U.S. citizens (and it does), they have the power to keep Social Security alive by raising withholding levels on paychecks.

It’s a cold scenario that envisions infinitely high tax rates, but it makes sense whether you like it or not.

Interesting Reading on an Important Topic

The Future of Social Security: Considering Privatization: Much of the literature about Social Security is as dry as sand, but Gail Lee’s clever little (75 pages) booklet about the possibility of privatization is thought provoking, easy to read, and actually interesting. That’s saying a lot for a book on this subject.

I read this a few years ago when it first came out, in 2012, and was impressed with how logical and simple the concepts are, as she lays them out. After discussing the history of the program, she quickly shows her readers how privatization is perhaps the best idea for making sure Social Security survives well into the next century.

Social Security: The Inside Story, 2016 Edition: Andy Landis’s classic “bible of Social Security” is regularly updated, and this is the latest version for those who want to know what the program is all about, how it works, what its future is, and how seniors can get the most out of their benefits. This huge paperback is the ideal reference book on the topic and earns its reputation as the go-to resource for all things Social Security.

Social Security For Dummies: An AARP publication, and a very detailed one, on the topic. Jonathan Peterson’s grand resource digs deeply into every conceivable niche of the Social Security program, offering up a wealth of data and opinions about the program’s future. For anyone who wants to know how much they will receive in monthly payments, this is the book to have. Peterson has written several books on retirement planning and specifically on Social Security, so he knows his stuff, which is good for readers.

Does the Social Security System Have a Secure Future?

The bit question whenever the topic of Social Security comes up is this: Will it survive past 2040? The expert team at Bankrate has a “haltingly positive” outlook, meaning basically that they think it will survive but in some altered form.

In their view, Social Security will likely experience some basic changes to the way it’s administered. A possible scenario included increases in payroll taxes and higher caps on earnings for workers. Both, or either, of those changes would extend the healthy life of the program for varying numbers of years. Beyond that, unless there is some sort of fundamental change, like lower benefit amounts or higher retirement ages, America’s most popular social safety net might have to replaced by something else.

In the short term, which means between now and 2030 or thereabouts, the program is expected to be on a solid foundation. Politicians are loathe to touch the subject for fear of voter backlash, but doing nothing is actually a choice too, so it will be informative to see what happens in the legislative halls in the next 10 years.

Let us know what you think about the future of Social Security. Do you think it’s doomed or on solid footing? Feel free to leave your comments below or tell us your opinion on our Facebook page. We look forward to hearing what your take is on this important issue.

Larry Bell is a financial researcher and writer. He retired after many years in finance with specialties in accounting and estate planning. Larry spends his time uncovering new, unusual, and profitable alternative investments.

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